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ARKANSAS MID-SIZED BANKS DEMONstrated during 2010 that smaller operations are capable of delivering big profits, even during turbulent times.

In terms of scale, the combined total assets of the state's XX mid-sized banks--those with assets of between $XXX million and $XXX million--top $X.X billion. That's a third less than the total assets at the largest bank headquartered in Arkansas, Arvest Bank of Fayetteville, at more than $XX.X billion.

However, the group of mid-sized banks produced a combined profit of more than $XX.X million during 2010. That performance was more than double Arvest's net income of nearly $XX million last year.

The top performer among those XX banks was First Financial Bank of El Dorado. The lender generated net income of $XX million and a whopping XX.X percent return on equity.

"Everyone likes to think of themselves as being different, but we are in a lot of respects," said Steve Cameron, CEO of First Financial Bank. "We're a successful local bank in El Dorado but do a lot of poultry lending across the Southeast."

The company has built an XX-year track record of government-backed agri lending supported by a network of XX loan production offices that stretches from Texas to North Carolina.

Several years have passed since the last would-be suitor called on First Financial. Management and shareholders have remained content to stay independent through the ebb and flow of merger mania.

The company did sell eight branches in July 2000 to Simmons First National Corp. of Pine Bluff. That $X.X million cash deal involved six branches in northwest Arkansas and two Conway locations.

The transaction encompassed $XX million in deposits and net assets of $X.X million. The move allowed First Financial to exit northwest Arkansas ahead of the real estate boom that went bust.

The company remains an active player in the residential market with mortgage operations that include loan production offices in Little Rock, Fort Smith, Jonesboro, Conway and North Little Rock.

"We keep expenses and loan losses under control and generate a lot of non-interest income," he said.

"It's a full-time job to stay where we are. We've been real fortunate in the last three years and avoided a lot of problems."

In 2006, First Financial Bank ventured onto the acquisition trail, buying Cornerstone Bank of Senatobia, Miss., in a transaction of nearly $X million. At the time, Cornerstone was a $XX million-asset concern with a second location in nearby Hernando, Miss., south of Memphis.

These days, government-assisted transactions dominate the mergers and acquisitions scene among lenders. Will First Financial join the game?

"We've thought about it, but we haven't done anything about it," Cameron said. "We're still kind of watching the market. We've not had anything catch our eye, but we're pretty cautious and circumspect about what we do."

East Arkansas Trio

Chuck Morgan, president and CEO of Pine Bluff National Bank, said 2011 was shaping up to be another successful year. The bank generated a $X million profit last year, good for an XX.X percent return on equity.

"We have a good management team, but a lot of it is geography. We're not in a market with a lot of commercial real estate problems. Our lending is diverse, with good agri lending, mostly crop production loans.

"We dipped our toe in northwest Arkansas and got it bitten off. It's all participations with other banks. I'm glad we didn't get any deeper than we did. We try to spread our capital out and not put it at risk in any one area."

Morgan, who joined Pine Bluff National in 1987, can't recall the last time the bank was approached about a possible merger.

"No one has ever called me inquiring about anything like that," he said. "We have a very young management team, and we have a vision of where we want to be XX years from now, and everyone wants to be part of that.

"We're not necessarily the fastest-growing bank. We want to make good steady profits, and focus on retaining earnings, building capital and preserving liquidity."

Morgan said the bank wasn't likely to join the bidding wars for insolvent lenders sponsored by the Federal Deposit Insurance Corp.
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